What are option premiums in trading?
Asked 4 years ago
Hello. I decided to start out by learning a call options trading strategy. As I was navigating around the trading platform, I saw something called 'option premiums.' What are these? (Please give an example) While we're at it, could you also please tell me how option premiums are calculated?
Andia Rispah Igobwa
Tuesday, September 14, 2021
The current market price of an option contract is known as the option premium. It's the money paid to the seller (writer) of an option contract by another individual, known as the buyer (taker).
Intrinsic and extrinsic value make up in-the-money option premiums. A put option's premium is simply the extrinsic value.
Premiums for stock options are typically expressed as a dollar amount per share, and most agreements cover the commitment of 100 shares.
Please follow our Community Guidelines
Related Articles

In Which Countries Is eToro Available?
Andrew Moran
December 22, 2024

Leverage on Avatrade: What It Is and How to Change It
Andrew Moran
December 22, 2024

Wealthsimple Review: Trading Options, Stocks, Fees, and More
Andrew Moran
September 30, 2021
Related Posts
Andrew Moran
What are ETFs and How Do They Work?
Filip Dimkovski
How to Determine When to Buy and Sell Dogecoin
Filip Dimkovski
An IQ Option Review: Is It a Safe Trading Platform?
Andrew Moran
How to Calculate the VWAP
Andrew Moran
How to Trade Using the VWAP
Andrew Moran
What Is the VWAP Indicator?
Andrew Moran
What Does VWAP Mean?
Can't find what you're looking for?